I'm not a big fan of Payment Protection Insurance. There have been too many times during my career as a Financial Adviser that I have heard horror stories. People haven't been paid out due to small omissions on their application form, or something small such as their job title has changed etc.
I can see the benefit of PPI when it comes to mortgages though. Generally, if you have a PPI policy for your mortgage (known as ASU) the insurer will step in to pay your mortgage after you have been off work for 4 weeks. They will continue paying the mortgage until the first of these two events happen: either you return to work on 1year passes. This is obviously important as the mortgage can be a huge sum. It's especially important if your company don't have a sick pay policy. My mortgage is £900 per month so I'd really struggle if I was off work. Even if I were to knock my mortgage down to interest only I'd still have to drum up £800 every month.
On the other hand I don't really see the purpose of PPI on items like credit card bills and electronic purchases. With TV's, DVD's etc I recommend never buying these on credit to start with. What is £1000 today will only cost £500 next year, and only £250 the year after that. By "making do" you'll save a fortune. Stick with the rule of thumb that if you want it enough you'll pay in cash.
With Credit cards you should never buy anything that you can't pay off within 3 months anyway. By keeping an emergency fund you therefore negate the need to ever take out PPI.
In a nutshell avoid PPI when you have it offered. Even a modicum of planning means that it is just an unnecessary expense.
New FREE download available at http://www.uncommonadvice.co.uk Ross Taylor is the author of "Mortgages, Money and Magic" and "The No B.S. Credit Crunch Ready Guide to Buy to Let in 2008". Ross is a successful Financial Adviser specialising in First Time Buyers and Buy to Let. He owns over £2million worth of property in the UK and regularly gives lectures on Financial Planning. |
No comments:
Post a Comment